DMA Calls for Quick Action on Postal Reform

WASHINGTON, February 13, 2006 – Now that postal reform bills have passed in both the U.S. Senate and House of Representatives, the Direct Marketing Association is urging quick action by the joint House-Senate Conference Committee to resolve differences between the two bills and quickly finalize legislation that will help secure a successful future for the U.S. Postal Service (USPS).

"For years, the Postal Service has struggled with declining mail volumes, increasing costs, and an ever-expanding number of delivery points it must service," said Jerry Cerasale, DMA’s senior vice president for government affairs. "And in an era of increasing competition and ever-changing technology, it’s a struggle for the Postal Service to remain economically viable while it is being hindered by an operating structure that dates back to July 1971, which is when the last postal reform law was implemented."

Postal rates increased last month, with additional increases already being proposed for 2007. These increases add up to millions of extra dollars in costs for commercial mailers and nonprofit organizations.

Faced with frequent and costly price increases, many mailers will ultimately be forced to curtail mailing campaigns and seek less expensive ways of communicating with current and potential customers. Cutting back on mailings will not only affect downstream industries, such as paper and printing, but will also further reduce Postal Service revenues, necessitating additional rate increases or even service cuts in order to keep the USPS afloat.

As passed by the House and Senate, postal reform legislation would give the USPS the flexibility to respond to both changing market conditions and ongoing evolution of communication technology, while maintaining the USPS’s cornerstone mission of providing universal service.

However, according to the DMA, it is crucial that the final bill include the following provisions:

• Placing a cap on rate increases. The Senate bill calls for a "hard cap" that would keep postal rate increases at or below the rate of inflation, while simplifying the process for the approval of such increases. The House also places a cap on rate increases, but this softer version could likely be broken by such events as the recent increase in gasoline prices. DMA supports the "hard cap" as passed by the Senate.

• Allowing worksharing provisions. Both the House and Senate Bills have worksharing provisions that continue to allow a reduction in rates for mailers, who in effect do part of the USPS’s work and push mail into the system later in the process – closer to the "last mile" before ultimate delivery.

• Continuing negotiated service agreements (NSAs). Both the House and Senate bills allow the USPS to continue to negotiate service agreements (NSAs) with mailers. These agreements will help prevent mail volume loss by providing rate relief and will also encourage mailers, both large and small, to better utilize USPS services by taking costs from the system.

• Eliminating the escrow account. Legislation passed in 2003 requires that excess funds for future postal employee retirement be held in escrow. Under both the Senate and House Bills, the escrow account will be eliminated. Those funds – some $3.2 billion in 2006 and larger amounts in future years – could then be used for current postal service needs and to offset the need for future rate increases.

• Reversing the current policy on retirement costs for military service. The USPS is now required to pay the total retiree benefits for employees who have also served in the military. This is different from other government entities, where the US Treasury pays military portions of retiree benefits. Both the Senate and House bills currently incorporate the recommendation of President Bush’s Commission on the US Postal Service, which in its 2003 report called for the transfer of military pension responsibility back to the US Treasury. The funds saved by the transfer of military pension costs could mitigate the need for future rate increases.

"The leadership and postal reform champions of the House and Senate have done a remarkable job over the past year in coming up with a workable set of reforms," added Cerasale. "With 9 million jobs and more than $900 billion in commerce affected by the success or failure of the Postal Service, it’s time to cross the finish line and give the Postal Service the flexibility it needs to operate competitively in the 21st century."

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The Direct Marketing Association (www.the-dma.org) is the leading global trade association of business and nonprofit organizations using and supporting multichannel direct marketing tools and techniques. DMA advocates industry standards for responsible marketing, promotes relevance as the key to reaching consumers with desirable offers, and provides cutting-edge research, education, and networking opportunities to improve results throughout the entire direct marketing process. Founded in 1917, DMA today has more than 4,800 corporate, affiliate, and chapter members from the US and 46 other nations, including 55 companies listed on the Fortune 100.

In 2005, companies spent an estimated $161 billion on direct marketing in the United States. Measured against total US sales, these advertising expenditures generated an estimated $1.85 trillion in increased sales in 2005, or 7% of the $26 trillion in total sales in the US economy (which includes intermediate sales). All together, direct marketing accounted for 10.3% of total US GDP in 2005.